A Change in Strategy
Bloodied by a long strike and lockout that left Southern California supermarket workers with higher health insurance expenses and without regular raises, their union has a new strategy: Divide and conquer.
In a departure from previous contract talks, the United Food and Commercial Workers Union plans to negotiate with each major grocery chain separately rather than bargaining with the employers as a group. The current contract expires March 5.
For decades the union has negotiated with the major chains as a group, but labor attorneys say that was a matter of convenience rather than legality.
Union officials are hoping to avoid a reprise of what happened three years ago, when management and labor sat down to carve out a new contract. Those negotiations turned into “a fiasco” for the union, said Rick Icaza, president of Los Angeles-based UFCW Local 770, the largest of the seven UFCW locals involved in the talks.
A breakdown in the talks sparked a 4 1/2 -month strike and lockout at Albertsons Inc., Kroger Co.’s Ralphs and Safeway Inc.’s Vons that ended in February 2004. The dispute disrupted shopping patterns across Southern California as shoppers turned to Trader Joe’s, Costco Wholesale Corp., Stater Bros. and other stores that weren’t part of the work stoppage.
The standoff ended after the parties reached a contract that included numerous wage and benefit concessions by the union, including the creation of a tier of workers with lower pay and inferior benefits.
Thousands of veteran supermarket workers quit the business for good during the dispute and in the months that followed. Now, almost half of the 95,000 UFCW grocery workers in Southern California are on the lower tier, according to the union. The 95,000 figure includes employees of Stater Bros. and Gelsons, a unit of Arden Group Inc., which had agreed in advance to accept the contract terms the UFCW reached with the three big chains.
The percentage of lower-tier workers is even greater at Albertsons, Vons and Ralphs. Workers hired since the end of the work stoppage account for 39,000, or 65%, of the 60,000 UFCW members at those chains.
“They have effectively eliminated the first tier through their hiring practices,” Icaza said.
No start date is scheduled for negotiations, but preliminary contacts are expected in the coming months.
The bargaining tactic that the UFCW plans to pursue has been honed by the United Auto Workers union in its dealings with carmakers, allowing the union to pick a weak target, negotiate a favorable contract and then seek to use that agreement as a template for subsequent pacts.
“It is easier to cripple one than three,” said Michael Posner, a Los Angeles attorney who represents labor.
Albertsons would be a likely first target because of the level of debt at Supervalu Inc., its new corporate parent, Icaza said. The Eden Prairie, Minn.-based company borrowed $6.1 billion this year to purchase Albertsons and its nonunion sibling, Bristol Farms.
“At this point it would be premature for us to discuss our strategy for the renegotiation of that contract,” said Shannon Bennett, Supervalu’s spokeswoman.
“Our approach ... is to seek to work collaboratively to ensure that we reach an agreement that is in the best interest of our associates, our customers and our business,” she said.
If matters once again degenerate into a lockout or strike, Icaza said it would probably involve just one company. Such a move would enable the union members who were still working to help financially support their colleagues who were on picket lines.
The UFCW has yet to notify employers of its plan to deal with the companies individually, Safeway spokesman Brian Dowling said. “But we are prepared to deal with the issue just as we have in other negotiations” -- with the company bargaining on its own.
Pleasanton, Calif.-based Safeway, however, “fails to see how potentially protracted single-employer, single-union negotiations are in the best interest of the employees,” Dowling said.
Such a strategy also could spiral into a lengthy bargaining period that would last far beyond when the contract expires, with the chains opting to insist on negotiating individual contracts with each of the seven union locals. One set of negotiations could turn into 35 different talks, counting the three major chains as well as Stater Bros. and Gelsons.
Industry executives also said the tactic could backfire on workers in the Inland Empire and other regions where the cost of living is lower than in Los Angeles and Orange counties. The chains would be likely to contend that employees in the less-expensive regions don’t require the same rate of pay.
“If they responded like that, I would counter by having the other six locals present when I negotiate or I would join their negotiations,” Icaza said.
The Teamsters used the separate-negotiations strategy in recent contract talks with the three big chains and won a better contract than the UFCW got, union leaders said.
When the UFCW’s talks with Ralphs, Albertsons and Vons stalled three years ago, the union struck Vons, and the other two chains immediately locked out their own union workers. The strike and lockout, which extended to Central California, ended after the union and management agreed on the two-tier pay system.
Veteran employees held on to their wages and most of their health benefits. But instead of raises, they received a series of bonus payments that lacked the compounding effect of annual percentage increases.
Moreover, new hires became subject to a less-generous pay structure and have had to wait as long as 18 months to qualify for health benefits.
Fewer than 10% of the UFCW members on the second-tier plan are eligible for health insurance and have elected to get the coverage, Icaza said.
Heavy staff turnover in the last three years -- from both the departure of veterans and a difficulty retaining new hires -- has hurt customer service and forced the chains to increase what they spend on training, Icaza contends.
Lower wages and a long waiting period for health insurance have started to transform the supermarket industry from a career path to a casual labor occupation, he said.
Industry executives counter that heavy turnover is a fact of life for any retailer.
“In some positions you can see 100% turnover,” said Lynn Marmer, spokeswoman for Cincinnati-based Kroger.
She said that the long waiting period for health benefits might be a contributor to the turnover rate and that the issue “is a question that the companies and union will be exploring together in negotiations.”
The union will demand a better healthcare package with a shorter waiting period for second-tier hires, a convergence track that eventually would put all employees on the same pay scale, and a series of wage hikes instead of bonuses, Icaza said.
A mutual-aid pact among the three big grocers was the main reason the companies were able to extract large concessions during the last negotiations, said Posner, the labor attorney.
The deal allowed Ralphs, which was the target of picket lines for only a portion of the dispute, to channel money to Albertsons and Vons, grocers that suffered large drops in sales because of the job action.
Kroger, which also owns the Food 4 Less chain in Southern California, paid a combined $146 million to Vons and Albertsons, said California Atty. Gen. Bill Lockyer, who later sued the chains, alleging that the agreement violated federal antitrust laws. The chains have said the pact was legal. The attorney general’s suit is expected to go to trial next year.
Ralphs’ additional legal problems also might hinder its ability to withstand union pressure this time around, labor leaders contend. In July, the company pleaded guilty to felony charges that some of its managers used fake names and Social Security numbers to illegally rehire about 1,000 workers during the work stoppage. Ralphs agreed to pay a $20-million fine to the federal government and create a $50-million restitution fund, most of which would go to the 19,000 employees who were locked out. The U.S. attorney’s office says that its investigation is continuing and that the government has the option to charge specific individuals in the case.
Union leaders plan to decide in the coming months which company they will negotiate with first, Icaza said.
Such a plan makes sense for the union, said Jeff Berman, a Los Angeles labor attorney who typically represents management in other industries.
“If you are the first company up and you get struck, you will see your shoppers going to competitors while you are losing money,” Berman said.
Joint bargaining, combined with the mutual-aid agreement, prevented the union from focusing on just one company in the last talks, Berman said. “But given the significant legal issues,” the chains “might be reluctant to have the same type of financial pact again.”
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(BEGIN TEXT OF INFOBOX)
Expiration date
Supermarket chains and the number of stores that have labor contracts running out March 5
Vons: 280*
Ralphs: 263**
Albertsons: 249***
Stater Bros.: 162
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*Includes 31 Pavilions stores
**Does not include 102 Food 4 Less stores whose contract expires June 3, 2007
***Does not include nonunion Bristol Farms
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Sources: Companies, United Food and Commercial Workers union
